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On July 1, Year 1, the Barley Company loaned $50,000 to the Jackson Co. The note has a stated interest rate of 10% and will mature on June 30, Year 2. All payments for principal and interest will be received at maturity. How much interest revenue will Barley report on its income statement for the year ended December 31, Year 1?

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Answer:

$2,500

Explanation:

Total Interest revenue after the maturity of that loan =

$50,000 × 10% = $5,000

Barley Company loaned $50,000 on July 1. According to December 31, Year 1, the interest revenue =

July 1 to December 31 = 6 months

$5,000 × 6 ÷ 12 = $2,500

Therefore, Barley Company should report $2,500 in Income statement December 31, Year 1. Moreover, the company should report $2,500 as Interest receivable in Balance sheet as the payment is not made so far.

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